I am Chairman and CIO of Gramercy Capital Mgt. Corp., a NY registered investment advisor, which I founded in 1986. Gramercy has been ranked #1 in the Nelson's Directory of Registered Investment Advisors. I hold a B.A. in history from the University of Wisconsin, Madison and was awarded a Ford Foundation Fellowship. I earned an M.B.A. in financial accounting from the NYU Graduate School of Business and am also a CFA (Chartered Financial Analyst). I spent 15 years as a media and leisure analyst before I began managing OPM (other people's money) in 1980 at Manufacturers Hanover Trust where I oversaw their $250 million "mid-cap" fund. I have been the subject of feature stories in many publications such as The Wall Street Journal Business Week, Newsweek , and USA Today. I have appeared often as a guest on financial programs on CNBC, Bloomberg, PBS and Fox Business. I have been contributing to Forbes.com since 2006 so you can see my track record of commentary.

Is Clearwire's "Special Committee" Finally Doing Its Proper Job?

In a new SEC filing dated February 1, Clearwire has broken its recent silence and implies that maybe the Special Committee is finally doing its stated job and representing the true interests of minority shareholders.

Even as Clearwire’s management has been noticeably silent, it appears that some consideration is being given to the DISH offer made last month that included an overbid by DISH of $3.30 vs. the very low offer from Sprint of just $2.97. In recent days CLWR had even traded as high as $3.40, a dime more than the DISH offer and $0.43 above the Sprint offer. The issue here is the value of the Clearwire spectrum at a time when there is a much stated shortage of spectrum available in the United States. It is at 2.5 GHz, a band that is gaining increasing attention around the world, especially in China where China Mobile is building out a huge system after doing tests with Clearwire in the United States.

These low-ball bids occur just at the very time that American consumers are moving swiftly to a choice of myriad smartphones and tablet devices that use vastly more bandwidth than simpler phones do. It is that very fact that is causing the Telecom providers to subsidize the expensive cost of iPhones and other devices if you sign a two year contract. They are willing to absorb the upfront losses because they expect to make back their bait over the life of the contract when users stream video and use their devices for things that hog lots of bandwidth. The Clearwire system is aimed not at voice but at heavy data users. Aspects of its proposed TD LTE design make it especially efficient in handling data and video at high speeds.

Comparable recent spectrum transactions have been at much higher prices per POP (unit of population) than either of these offers represent. That is why Crest Financial and other large holders have urged a different solution to Clearwire’s lack of adequate funding than to sell out to Sprint the shares it doesn’t already own. Crest has filed a new lawsuit in recent days. The Dept. of Justice in late January has also asked the FCC to delay the clock on the application filed by Sprint. Sprint is attempting to sell a 70% interest in itself to foreign based Softbank, headed by Masayoshi Son.

Sprint, like Clearwire, is also heavily debt laden and has run itself poorly in recent years. To wit, its stock at $5.75 is a tiny fraction of its peak price above $68 in 1999. Sprint, of course, keeps insisting that DOJ’s request is just normal and that any offers from anyone other than Sprint are not really valid and meaningful offers. So far, it has not increased its offer. One presumes many negotiations are going on behind the curtain but so far, shareholders are being kept quite in the dark.

However, one good sign is that Clearwire has not accepted any monthly $80 million payments from Sprint, exchangeable eventually for shares at an even more ludicrous price of $1.50, because if they do the DISH offer is discontinued. The filing says that Clearwire has accepted neither the January nor the February payments.

Here is the actual comment released today:

“As previously disclosed on January 8, 2013, Clearwire received an unsolicited, non-binding proposal (the “DISH Proposal”) from DISH Network Corporation (“DISH”). The DISH Proposal provides for DISH to purchase certain spectrum assets from Clearwire, enter into a commercial agreement with Clearwire and acquire up to all of Clearwire’s common stock for $3.30 per share (subject to minimum ownership of at least 25% and granting of certain governance rights) and provide Clearwire with financing on specified terms. The DISH Proposal is only a preliminary indication of interest and is subject to numerous, material uncertainties and conditions, including the negotiation of multiple contractual arrangements being requested by DISH (some of which, as currently proposed, may not be permitted under the terms of Clearwire’s current legal and contractual obligations) as well as regulatory approvals.

In connection with the Sprint Agreement, Clearwire and Sprint also entered into agreements that provide up to $800 million of additional financing to Clearwire in the form of exchangeable notes, which will be exchangeable under certain conditions for Clearwire common stock at $1.50 per share, subject to adjustment under certain conditions (the “Sprint Financing Agreements”). Under the Sprint Financing Agreements, Sprint has agreed to purchase, at Clearwire’s option, $80 million of exchangeable notes per month for up to 10 months.

As previously disclosed on January 8, 2013, Clearwire did not take the initial draw under the Sprint Financing Agreements as DISH indicated that its preliminary proposal would be withdrawn were Clearwire to draw on the financing. In order to allow the Special Committee to continue to evaluate the DISH Proposal, at the direction of the Special Committee, Clearwire has not taken the February $80 million draw. The Special Committee has not made any determination with respect to any future draws under the Sprint Financing Arrangements.

Also, under the terms of the Sprint Financing Agreements, Sprint is only obligated to provide financing for the last three draws (in August, September and October 2013) if an agreement has been reached between Sprint and Clearwire on the accelerated build out of Clearwire’s wireless broadband network by January 31, 2013. Although the parties have not come to an agreement on the accelerated build out, Clearwire and Sprint have amended the Sprint Financing Agreements to extend the date by which agreement on the accelerated build out must be reached to February 28, 2013 for the Company to be able to take the last three draws.

The Special Committee will, consistent with its fiduciary duties and in consultation with its independent financial and legal advisors, continue to evaluate the DISH Proposal and engage in discussions with each of DISH and Sprint, as appropriate. The Special Committee has not made any determination to change its recommendation of the current Sprint transaction.

The Special Committee and Clearwire will pursue the course of action that it believes is in the best interests of Clearwire’s non-Sprint Class A stockholders. Neither Clearwire nor the Special Committee has any further comment on this matter at this time.”

Joan E. Lappin CFA Gramercy Capital Mgt. Corp.

Mrs. Lappin, Gramercy Capital and its clients own shares in Clearwire at this time.

For information about our firm contact us at info@gramercycapital.com Follow Joan Lappin by clicking the button above and at twitter: @joanlappin.

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